Networks of Cooperation and Competition in Internet Company Clusters

ABSTRACT

Using network analysis, this report categorizes the inter-firm relationships amongst the Internet companies concentrated in Tokyo's 23 ward's into cooperative networks and competitive networks, and investigates the influence of each upon the industry.

The research results found that the network of cooperation, a vital feature of the Silicon Valley model, is currently non-functional in Tokyo. These relationships have failed to develop because venture capitalists are not fulfilling their primary function of supporting start-ups. Furthermore, the dual board memberships that bring cohesion to Silicon Valley do not occur in Japan.

In the case of Tokyo's Internet companies, however, inter-firm cooperative networks can be developed instead through the mediation of the major companies. These companies can take on the role of venture capitalists by providing the risk money necessary for new cooperative ventures.

As for the network of competition, more important than the actual number of competitors for a particular company is the intensity of the rival company's competitive environment. Thus, from the perspective of inter-firm networks connected by customers, performance can be improved through a decisive "re-wiring" strategy (i.e., forming rivalries with companies from less competitive environments) or through a strategic affiliation with a major company.